The tire king: Les Schwab at 80

The businessman who has the most recognized face in the Northwest drives himself and shares his profits -- and is rewarded with an unparalleled share of the market

Sept. 28, 1997

By Doug Bates
The Oregonian

Les Schwab, at work in a tire warehouse in 1997

An hour before the first sunlight peeks over the rimrock east of Prineville, the most famous man in Oregon rolls out of bed at his modest beige house on Ochoco Creek. In pajamas and robe, shoulders hunched, he moves with a slight shuffle, though the chest remains stout as a ponderosa trunk and the forearms still bulge like a cowhand's. It's easy to picture him wrestling a big wheel off a backhoe, just the way he did a half-century ago.

He isn't the governor, nor a Trail Blazer, nor a high-tech mogul. He is Les Schwab, the tire king and retail icon whose tough, jowly, no-bull visage is without dispute the most widely recognized face in the Pacific Northwest.

At 5:30 a.m., however, without that trademark Western hat and blue jacket, the king barely resembles the man seen daily by the throngs exposed to his annual $18 million in advertising. The steely squint of his billboard image -- equal parts John Wayne, Winston Churchill and Archie Bunker -- dissolves when he puts on the eyeglasses he needs to read his morning paper.

In the kitchen he brews coffee and fixes some eggs and bacon, and later, after the dishes are cleared and the sun is up, he joins his wife, Dorothy, in their years-old routine. It never varies: one game of cribbage, then two of gin rummy. More often than not, Dorothy wins.

"She cleans my clock," the king mutters gruffly, pretending to hate it. The twinkle in his eyes tells a different story.

Married right out of high school at 18, the Schwabs celebrated their 61st wedding anniversary this summer. Soon they'll both turn 80 -- Les next Friday, Dorothy in December. And although each remains in good health, they've spent a great deal of effort this past year taking steps to ensure that the vast tire empire will remain in the family after they're gone.

"The company isn't for sale," Schwab says with typical bluntness. "It will go on, bigger and better than ever, and continue to provide opportunities for young people to be successful. All the stock will remain in our family."

That's got to be a disappointment for the large tire companies that have been circling Prineville like buzzards lately. In July, top executives of Michelin, Bridgestone and Goodyear all swooped into the tiny Crook County town to court Les Schwab, and no wonder. The financial profile of his company -- the largest independent tire chain in the United States -- is astonishing.

Its total value, according to an estimate to be published in Forbes magazine this fall, may be as high as $500 million.

The company is completely debt-free.

It has no unions and no labor-relations problems.

Its annual sales, which have doubled every five years, will exceed $800 million this year and will almost certainly top $1 billion by 1999.

Ten to 15 new Schwab stores are opening every year, bringing the total to 280 in Oregon, Washington, Idaho, Montana, California, Nevada and Alaska, with about 5,300 full-time employees in both company-owned and dealer-owned stores.

"We don't have the blimp flying around like Goodyear," Schwab says, "but we've got something better -- the Les Schwab sign -- and in the Northwest that's more powerful than the blimp."

Statistics support that claim. More than half the tires sold in the Pacific Northwest come from Les Schwab stores. A survey by The Oregonian last year showed Schwab with 59 percent of the Portland market, compared and 3 percent for Goodyear stores. A similar independent survey gave him 38 percent of the Seattle market. East of the Cascades, Schwab has a staggering 85 percent of all tire sales.

Sharing the wealth

Anyone who's ever driven up to a Schwab store has glimpsed the secret to Schwab's success: those hustling, helpful, super-enthusiastic employees who literally jog out to the car to serve you.

But that's only part of the story. Schwab says he doesn't coach his people to run the way they do. His strategy is simple but unparalleled in American big business: He gives half the profits -- HALF the profits -- of each store to the employees who work in it.

"On an effective level the company has no employees, only partners," says Robert Harris, a University of Washington history professor who retired to Prineville and wrote a research paper on the Schwab phenomenon. "There is no room in this pattern for the idler because his indolence cuts the income of his fellow employees."

Schwab himself voices disbelief that no other large company has "the guts" to share profits to the full extent he does.

"Why be greedy?" he says. "If I can help make 20 young people become successful, doesn't that make me 20 times more successful?"

During his lifetime, that philosophy has helped transform Schwab from an impoverished orphan to one of the wealthiest men in America. Yet just glancing at him or his home, you'd never guess he's the tycoon that he is.

"I've known Les for years and years and years, and he doesn't put on airs or act like the big shot," says 70-year-old Gale Ontko, Prineville author and historian. "Most of the time he looks like an old rancher wearing a pair of cowboy boots, Levis and a slouch hat.

"His home is really not very big. It's only about 15 miles down the road from where I live, and he's been in that same house for many, many years. It's only a one-story affair -- real nice, but not something that you'd think of as the home of the head of the Schwab company."

Tough upbringing

Compared with his boyhood home, the 3,000-square-foot house where Schwab has lived for the past 32 years is the Hearst Castle. Born in 1917 in Bend, he was reared in the nearby woods with two siblings in a two-room shack at the Brooks Scanlon logging camp where his father worked.

Schwab describes his father as a decent, gentle, hard-working man -- and a hopeless drunk. His mother taught school at the log camp in a converted railroad boxcar with windows cut in the sides.

When Les was 15 and attending Bend High School, his mother broke under the strain of their rough life and died of pneumonia. That same year his father was found dead in front of a moonshine joint. From that point on, young Les was entirely on his own.

He supported himself through high school by selling and distributing the Oregon Journal newspaper, published in Portland. Through hustle and great salesmanship, he controlled all of the Journal's nine routes in Bend before he was 17. When he was a senior, in the middle of the Depression, the school principal called him in one day to see how he was doing and was astounded to discover that Schwab was making $200 a month -- more than the principal was.

Schwab and his high school sweetheart, Dorothy Harlan, married soon after graduation and devoted themselves to his budding career as a newspaperman. After a successful stint with the Journal, he became circulation manager for Bend's daily paper, The Bulletin.

Life was looking up for the young Schwabs. They bought their first home and had a baby boy, Harlan, born in 1940, and Les was faring well at the newspaper. He might have gone on to become a publisher, had the fates cooperated. But then came the bombing of Pearl Harbor and the Schwabs' lives, like those of most Americans, were torn apart. Les volunteered for the Air Cadets and that was the beginning of an arduous period of hardships and financial setbacks, including the sale of the new home they could no longer afford.

After the war, Schwab went back to work at The Bulletin as circulation manager. Once again he found success, and soon he and Dorothy were able to buy another home. Les wanted badly to buy into the newspaper, but the owner at that time, Robert Sawyer, wouldn't go for it. Schwab was bitterly disappointed at the time but now knows it was one of many lucky breaks that marked his march to success. The frustrated young man began to search for a way of going into business for himself.

In 1952, at age 34, Schwab took a huge risk. He sold their home, borrowed on his life insurance and got an $11,000 loan from a brother-in-law. He took the money to nearby Prineville and bought a down-on-its-luck O.K. Rubber Welders tire shop that had one employee and a yearly gross of only $32,000, which came from retreading tires, fixing flats and selling a few new tires on consignment.

During the next year, Les and Dorothy had their second child, a girl, Margie, and their little tire shop did $155,000 in business -- five times what it ever did before. It was the start of what countless business schools and management consultants now hold up as the best example of creative innovation in retailing since the late J.C. Penney.

"If I do anything right," Schwab says today, "it's that I can jell ideas -- that and form programs. Other than that, I'm not too smart."

His first tire shop in Prineville was an 1,100-square-foot shed with a two-holer out back, but through its shabbiness Schwab had a vision. He concluded that among tire buyers, trust in the dealer was far more important than the brand of the tire and that he could capture the local market through the force of sheer honesty and superb customer service.

But he couldn't make a decent profit under the franchise agreements the big tire companies offered him, so he decided he had to buck them and go independent -- buying tires from overseas if necessary.

Schwab made his move in 1954-55, opening independent "Les Schwab Tire Centers" in both Bend and Madras. The expansion thrust him into a high-stakes conflict with O.K. Rubber Welders, his Prineville franchiser, because now he was competing head-to-head with O.K. franchises in the two towns he had expanded into.

"A hell of a fight broke out," Schwab recalls. "If I had lost it, it could have been the end of my business."

Dorothy remembers a home full of stress during the crisis. "Les walked the floor all night for a while. He told me the company might take his equipment and bankrupt us. He said he might have to go back to selling newspapers."

The climax came when five executives from O.K. Rubber flew into Redmond for a showdown with Schwab, who came alone to the motel room meeting.

"They tried to rough me up, verbally, and said I had to get out of Bend and Madras or I was finished," he recalls.

Schwab pretended to lose his temper. "I blew up at them and told them I didn't want any more of their harassment. I told them if they had anything more to say, they could say it in court.

"Of course," he adds with a laugh, "it was all a big bluff."

An open book

More sleepless nights followed, but the company didn't sue. Schwab's fledgling string of tire shops had survived -- just barely -- a shaky infancy.

"As I look back on it," he says, "I think they realized it was too risky to take me to court. If they'd lost, it would have messed up their franchises nationwide."

From the start, the gutsy young entrepreneur also realized he couldn't achieve his vision without a lot of help -- but how could he get hired hands to hustle and win over customers the way he could?

That was the genesis of his profit-sharing program, the key to his company since Day One. Along with it came his groundbreaking open-book management program, giving employees access to financial statements and ledgers that most companies keep closely guarded.

"How," Schwab says, "can you expect men who work for you to help build your business if they don't know how it's run?"

The company has no team of recruiters scouring the country for fresh talent. Schwab always promotes from within. Every new employee starts out in the tire shop. The typical new hire is an ambitious young man without the means to go to college. Schwab says such a young person entering the company today, working his way up to store manager and staying through retirement, can expect to go out a millionaire.

"As a result of the profit-sharing, we've already got people coming out with $600,000 or more in their trust accounts," Schwab says. "That's why I don't like to talk about how successful I've been. I prefer to talk about how successful my employees are."

Schwab has always used most of the company's share of profits to add more stores, build giant warehouses or purchase necessities such as corporate aircraft to help connect his sprawling empire.

"Money, in itself, doesn't mean anything to me," he says. "Getting the best of the major rubber companies is my reward."

Michelin man

Today, to Schwab's immense satisfaction, it's those big tire companies that need him, not the other way around. That's why Francois Michelin himself flew to Prineville from France this summer to meet the Tire King. Schwab executives who witnessed the extraordinary meeting enjoy relating how Monsieur Michelin got a guided tour of the operation from Mister Schwab, and how Mister Schwab got a kiss on both cheeks from Monsieur Michelin -- something the folks in Prineville don't see every day.

Michelin declines to discuss his reasons for jetting to the small Oregon town. "It was a private meeting," he says.

Schwab, with a sly grin, says the Frenchman came calling mainly to "have a look at us" and to show his respect. "Historically, we haven't sold a lot of Michelin tires, and he'd obviously like to improve our relationship."

"What Les loved was battling with the big boys," recalls Norm Nelson, one of Schwab's former partners. "It was never about wealth, and he was not a guy to let go of his money. He never was frivolous. He always wore the same old clothes and the same old jacket and hat for years, and he never drove a very fancy car. He frowned if a store manager bought himself an expensive automobile. When a manager showed up in a Cadillac, old Les would have a fit."

Nelson, 72, now retired and living in The Dalles, speaks fondly of Schwab, despite the falling out that led Nelson to abruptly quit the company in the middle of a board meeting in 1970.

"I left on rather acid terms that day, but I have nothing derogatory to say about Les. If you wanted to dedicate your life to him, Les was a great guy to work for. He sure treated me right. But he just lives and breathes tires. That's his whole life, and if you're willing to eat and sleep tires, too, you can't go wrong working for him."

Schwab talks mostly with affection for Nelson and for a second former partner, Don Miller, also retired. During a weak moment back in the '60s, Schwab says, he swapped stock for profit shares with the two men, and today he's deeply thankful that he wised up and bought them out in 1970.

If he hadn't, the duo's stock today would be worth at least $80 million combined, Schwab estimates.

Handing off

Today most of the company stock is held by his daughter, Margie Denton, whose husband, Denny, works with Les Schwab in the management of timber and land improvement on Schwab's 80,000-acre LS Ranch in southeast Crook County.

"When I'm gone, Margie will be the main stockholder, and Phil Wick, our president, will take over running the company," Schwab says.

Wick, at 54, is close to the age Schwab's son, Harlan, would have been today if he hadn't died when he was 31. Harlan, a talented and promising developer of products for his father's company, died in a car accident in 1971.

"Les is like a father figure, not only to me but to most of us here," says Wick, who grew up in Alfalfa, east of Bend, and went to work for Schwab at 21. "He's done a tremendous job of positioning the company for the next generation. And he's done it by bringing people like myself onto the executive group. We grew up with the company, learning it all from him, and that's the way we run it."

During the past year, Schwab has been having Wick join him as a pitchman in some of the company's advertising. The elder man says his protege might someday replace him entirely in the ads, although it's hard to imagine the company truly giving up an icon that has become the Colonel Sanders of tires for a seven-state region.

Margie Denton, meanwhile, says she and her two daughters, along with her niece and nephew -- Harlan Schwab's offspring -- are dedicated to keeping the company intact.

"We are very protective of the stock, not from greed, but because we all have the same goal in mind, and that is to see the continuation at least through our generation," she says.

It's an iron-clad commitment she has made to her father, she says.

"I have the utmost respect for him, his views and his morals," she says. "Family life was very important to Daddy. Sure, the company was always the talk at the breakfast table and the dinner table, but it was just our way of life.

"He spent a lot of time with me. We've hunted together, and when I was little he would take me places, like the carnival or out to look at Christmas lights. A lot of times he's taken me out to where he was raised at the Brooks Scanlon logging camp. He shows me where his home sat and where the boxcar was that he went to school in."

Schwab, according to his daughter and just about any store manager you talk to, isn't at all the gruff bulldog that he appears to be in his iconographic advertisements. He exudes toughness and talks bluntly -- some would say as crudely as a ranch hand at times -- but he has a sweet nature, too, and he lets it show.

"Daddy is very approachable," Denton says. "I've always felt I could go and talk to him. Employees feel that way, too, I think. He doesn't get mad at you. I've rarely seen him get mad."

Schwab works only mornings these days, driving to work in a utilitarian 1996 GMC truck with cloth seats and few extras. He dresses simply in black work pants, sturdy black shoes and a white polo shirt -- an echo of the uniforms worn by thousands of employees who work in his tire shops. He usually goes without the Resistol brand "Fort Worth" style hat that he saves for having his picture taken and working on the ranch.

After lunch -- always at his own table at Prineville's Meadow Lakes Golf Course restaurant -- he heads home for a nap and a workout on an exercise bicycle, then back into town for nine holes of golf. In the evenings he watches baseball on television, reads about current events and always, always keeps a finger on what's going on in his company.

Around Prineville, where Schwab is by far the largest employer with 700 workers, the man is clearly revered. Community leaders are well aware that keeping the headquarters in Prineville requires Schwab to bring in his products from urban receiving points, then ship them right back from the warehouse to the urban stores where most of the business is done.

Schwab estimates that his decision to stay in Prineville might cost him as much as 40 cents a tire -- and he sells 4 million of them annually -- but he says he isn't about to budge.

Like any high-profile captain of industry, Schwab has his detractors. Through the years, he has been publicly criticized for his sometimes ultra-conservative political views, the absence of women among his store managers and the restraint of his philanthropic activity.

Schwab makes no apologies for his political views, and he says there is no discrimination against women in his company. He points out that all store employees have to start in the tire shops, and that means changing big tires on trucks and heavy equipment. The most qualified applicants are also among the physically strongest, and they're almost always males, he says. He notes that his business office is jammed with women and that a woman -- daughter Margie -- is now the principal owner.

As for philanthropy, Schwab says he and his family have quietly contributed to more causes than the public knows about -- most recently by giving $100,000 toward a new maternity facility at the Prineville hospital.

"Dorothy and I have talked about the fact that we've got more money than we could ever possibly need," Schwab says. "We've talked about setting up a charity, like the Fred Meyer Foundation, but those things always end up giving money to things that the founder would never agree with.

"So we've pretty much decided that the best cause we could possibly contribute to is the opening of more Les Schwab stores, creating more opportunities for young people to become successful. I can't imagine a more worthwhile goal in life than doing that."

Schwab has outlived virtually all of his closest friends, so it is Dorothy Schwab alone who knows intimately what defines the man. Without question, she says, her husband's need to succeed, both in family life and in business, has flowed from the hardships of the old logging camp and the loss of both parents when he was 15.

"He's always been so determined, so driven to succeed in a business of his own," she says, "but I can tell you that for Les, family has always come first.

"In a marriage of 61 years you can't say that you never had a fight or anything like that. We have had so many crises in the business and in losing our son and things like that, so we've always just taken it one day at a time, and I don't think we ever went to bed really mad at each other.

"We aren't involved in any organized religion, but I think that privately we're somewhat religious people. I do know that Les believes that someone has been looking out for him all these years, and I would have to say that I agree."

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